Economics · Financial Accounting
'Apex Manufacturing Co.' is preparing its final accounts for the year ended March 31, 2025. The accountant needs to determine the correct placement of two specific items crucial to calculating the Gross Profit from production: Statement A: Freight and Cartage on Raw Materials Purchased (Inward Freight) Statement B: Wages paid to the Factory Production Workers In which accounting statement and side should these two transactions be placed to accurately determine the Gross Profit?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both Statement A (Inward Freight) and Statement B (Direct Wages) are debited to the Trading Account, as they are considered Direct Expenses necessary to bring the goods to a saleable condition.✓
- 2Both Statement A and Statement B are credited to the Trading Account to reduce the Cost of Goods Sold.
- 3Statement A is debited to the Trading Account; Statement B is debited to the Profit and Loss Account.
- 4Both Statement A and Statement B are debited to the Profit and Loss Account, as they represent operating expenses.
Correct answer
Both Statement A (Inward Freight) and Statement B (Direct Wages) are debited to the Trading Account, as they are considered Direct Expenses necessary to bring the goods to a saleable condition.
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